Skip to main content. Skip to contact links. Skip to navigation. Skip to search. Skip to footer navigation.

Pre-qualification vs. pre-approval: Explaining the difference

By: Movement Staff
August 13, 2018

When you hear pre-qualification and pre-approval, you may think the terms are interchangeable, but they have different meanings when it comes to the home buying process. Here's what you need to know to make these early steps of home financing easier to understand.

Home
Courtesy of Christian Koch
What's a pre-qualification?

A pre-qualification is a best guess of what you can possibly afford. Because it's often based off what you verbally tell your lender about your income, it may not always be reliable.

What's a pre-approval?

A pre-approval is the real deal. It's an actual estimate of how much you can afford for your home. Underwriters use documentation to verify your pre-approval, meaning it's more reliable than a pre-qualification.

What Movement does

While most lenders issue a pre-approval without a qualified decision maker's input, our Movement Buyer's Advantage program puts your income and credit information directly in front of an underwriter. Within hours,* you could get an underwritten pre-approval that tells you exactly where you stand.**

You usually need the following items*** to be considered for a pre-approval:

● W-2 forms
● 1040 federal tax returns
● Pay stubs or current LES (military)
● Copy of driver's license and/or Military ID
● Federal corporate and/or partnership tax returns (self-employed)
● Statement of Service from Command – must include eligibility for reenlistment (military)
● Award letters for retirement income, social security, disability income and SSI (if applicable)

To sum it up

While a pre-qualification may get you thinking about your options, a pre-approval will tell you just how much home you can afford. 

You don't need a thesaurus to understand all the mortgage jargon. You just need a good loan officer to help.

Find a loan officer in your area to find out what you can afford.

* While it is Movement Mortgage's goal to provide underwriting results within six hours of receiving an application, process loans in seven days, and close in one day, extenuating circumstances may cause delays outside of this window. ** For qualifying borrowers. *** Items may vary.

Author: Movement Staff

The Market Update is a weekly commentary compiled by a group of Movement Mortgage capital markets analysts with decades of combined expertise in the financial field. Movement's staff helps take complicated economic topics and turn them into a useful, easy to understand analysis to help you make the best decisions for your financial future.

RELATED